Latest posts by FIRECracker (see all)
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You should let your kids fail.
OK let’s back up a bit. I know that’s a strange statement. But a reader sent me this article recently:
For those of you who are too lazy to click the link, I’ll give you the gist of the story. Basically, an HSBC survey found out that as many as 37% of Millennials borrow from the “Bank of Mom and Dad” to buy a house in Canada.
And get this: despite the fact that as many as 73% of buyers haven’t even STARTED to save for a down payment and more than 25% have NO IDEA how to make a budget, 82% of the Canadian Millennials who don’t own a home STILL plan to buy one within the next five years.
So how exactly are these clueless Canadian Millennials planning to deal with any unexpected home ownership costs?
“21 per cent of them hit up their parents to help them pay for other unexpected costs after they had purchased homes. “
That’s right, Boomers, your juicy arteries better be flowing because your vampiric Millennial children are coming to suck you dry. Bye bye, retirement dreams! Bye bye! (And my friends wonder why I’m terrified to have kids. *Eye roll*).
Now, to be fair, Millennials aren’t completely to blame here (yeah, yeah, I know being a Millennial makes me biased but hear me out). If all you do is make it rain every time your kid asks for money, what did you expect?
Now, I know parents reading this blog are sharpening their pitchforks and lighting their torches right now, but I’m still going to say this:
The best way to screw up your kids is to give them money.
How do I know?
Well, let me tell you a story.
Back in Malaysia, we met an American couple who were travelling the world, just like us. The guy, Nick, seemed to have the same obsession with travel hacking as I did and we quickly bonded over frequent flyer points. That fact was already surprising enough, but what surprised me even more was his backstory.
You see, unlike me, Nick grew up rich. He never had stomach worms, didn’t have to play in medical waste, or use a coke can as a teddy bear . By the time he was in grade school, his Dad made 6-figures a year. And by the time he was in high school, his Dad made $300K a year.
But making big bucks is one thing. Keep it is another.
During his final year of high-school, Nick’s Dad’s company downsized and he suddenly lost his job.
Having never had to worry about money, Nick’s Dad never learned how to save it. So instead of a healthy bank account, all he had was an over-sized McMansion (that he never bothered to pay off), a BMW (again not paid off), and a thick stash of maxed out credit cards.
So when Nick asked his Dad for help with his tuition, he simply shrugged. “I just lost my job, son. You know I can’t help you. I’m broke.”
Nick looked around at the McMansion, the spotless marble floors, the sparkly chandelier, and the brand new BMW M6 (is that good? I don’t know anything about cars) in the driveway.
“Yeah, but couldn’t you sell your car or at least get rid of the maid?”
“Sorry, bud. No can do,” his Dad said, leaning back in his LazyBoy chair and taking a swig of his favourite Scotch. “I need them to live.”
Nick had no choice. So he went to his school councillor, who taught him how to take out a student loan. After that, he got a minimum-wage job so he could pay off his loan while getting his degree. He selected Chemical Engineering because he heard there were plenty of good jobs out there for him after graduation. Messing around with a “risky” degree was NOT going to be an option now that the bank of Dad was firmly closed.
“Does that make you bitter?” I asked. “The fact that your dad wouldn’t help you out?”
“Are you kidding?” He said. “That was the BEST thing that ever happened to me.”
“Really?!” I asked.
“I know it didn’t feel like it at the time, but because of it I learned how to save my money. And now I’m the only one in my family who has his shit together when it comes to my finances.”
“How so?” I asked.
“Well let’s see,” he said, ticking off the items on his fingers. “My aunts and uncles are all in massive amounts of debt. My cousins all have maxed out credit cards and don’t know their ass from a hole in the ground. My Dad has declared bankruptcy…twice”.
Crossing his legs, he leaned back against the pool lounge chair, a satisfied smile on his face. “But me? I paid off my student loans a year after graduation. And now after working for 10 years, I have enough money to live abroad and never work again.“
“You’re kidding, right?” I couldn’t believe it. Another couple just like us?
“That’s why I’m here, travelling the world with my wife. Everyone else back home is stuck in their crappy jobs, terrified they’re going to get laid off.”
Staring up at the cloudless blue sky, he sighed happily. “My Dad being a dick and not giving me money for college was the best thing that ever happened to me.
I blinked in amazement. First at the fact that we met another couple like us, just hanging out at the hotel pool, and secondly at the fact that even though Nick and I had vastly different upbringings, we had one thing in common:
Our parents made us stronger by not giving us money.
Nick learned how to budget, because he HAD to. He learned how to pay off his debt, because he HAD to. He learned how to support himself without having a job, because he HAD to.
And I know what that’s like.
Like Nick, my parents never gave me money. Not because they spent it all, but because they had no money to give me in the first place. What little money they earned had to be sent back to relatives in China.
But even though I grew up poor, I’m not bitter about it. Just like Nick isn’t bitter at his Dad for not giving him money.
Because regardless of growing up rich or poor, not getting hand-outs helped us understand money. We HAD to figure it out, because neither of us had any safety net to fall back on. You either mastered your money, or you starved to death on the streets. That was our reality.
They say that necessity is the mother of all innovation. And that was definitely true for Nick and me. Neither of us went down the path of FI just for shits and giggles. We did it because we realized how dangerous it was to live a life in which someone else could destroy us with a flick of a pen.
Whether it was our boss, our banker, or our own family, nobody, NOBODY should wield that kind of power over us. That is what we fundamentally believe. And that is why Wanderer and I write this blog. Because we believe that nobody should have that kind of power of YOU as well.
So to the parents out there reading this weird little blog: Don’t be so eager to help your kids out financially when they run into problems.
And to the scared Millennials wondering what would happen if they didn’t have their parents’ support:
You are stronger than you think.
And that’s why I believe you should let your kids fail.
What do you think? Should parents help kids out financially?